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Characteristics Of Duopoly: What Is A Market Structure?

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What is a market? A market is a place where buyers and sellers meet for the transaction of goods and services. The buyers must have something they can offer in exchange. In present scenario, it is money. In barter system which was existed before the invention of money, goods where exchanged between buyers and sellers. What is market structure? Market structure can be defined as those peculiar characteristics of the market that significantly affect the behavior and interaction of buyers and sellers. Criteria for classification of market structure Market structure consists of four main market characteristics: • The number of sellers • The nature of the product • The ability of individual firms to influence the market • The ease of entry into …show more content…

When members of a duopoly compete on price, they tend to drive the product 's price down to the cost of production, thereby lowering profits for both members of the duopoly. Duopolies are most effective when the demand for the duopoly 's product is not greatly affected by price. This is why duopolies are more effective in the short term; over the long term, prices often become more elastic as consumers find substitutes for the product. Also, demand volatility may lead to disagreements within a collusive duopoly regarding outputs and prices. A real time example A very common and obvious real time example for duopoly is Pepsi and Coca-Cola in the field of soft drinks. Pepsi and Coca-Cola together control more than three fourth of the total soft drinks market. By analyzing this example alone we can identify how competitive duopoly market structure is. Two highly powerful companies competing for supremacy can always result in extreme competition. Merits • Intense …show more content…

• The entrepreneurs under this category are usually profit maximizes. • Restaurant, soap etc. are the classic examples for monopolistic. Merits • No barriers to entry and exit • Much better operational efficiency than monopoly due to diversified products and lack of single supremacy. Demerits • Advertisements are usually persuasive. They are not informative. • Low quality differentiated products lead to unwanted wastages like packaging. Oligopoly A highly concentrated market structure which contains many firms. A few firms among them will gain supremacy and will control the market. Characteristics • Interdependency is a primary quality required to survive. • Since interdependency is a major requirement, strategic plans are essential for the survival and growth of business organizations in oligopoly. • It is really hard for new entrants because oligopolies have a common tendency to maintain their dominance in the market for a long term. This can be hazardous for the new entrants. • Oligopolies did not confer to a particular pricing method. They may increase or decrease their product prices depending upon the market conditions. • Film, television, steel etc. are examples for oligopoly. Perfect

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